Dubai's mid-market short-stay rentals offer more room for growth

Dubai’s short-term rental market reflects the emirates’ status as a dynamic global hub for business and tourism.

Driven by Dubai’s decades-long commitment to attracting tourists through world-class attractions, events and infrastructure, the holiday home sector has witnessed impressive growth across budget, mid-market and luxury segments.

Dubai’s strategic positioning as a regional hub for business draws professionals from around the world, and contributing to demand for flexible accommodation options that extend beyond the traditional hotel room. The rise of digital nomads accelerates this demand, as travelers look for extended stays in comfortable self-catering accommodations in good locations.

Premium properties that feature amenities such as private pools, views and bespoke services are all in demand for this segment of travelers, which is mainly comprised of affluent tourists and business visitors.

Short-term rentals in this segment have the potential for substantial revenue generation, fueled by premium pricing and demand for exclusive experiences. Locations such as Palm Jumeirah and Downtown Dubai remain highly sought after for high-end rentals, with average daily rates for luxury short-term rentals often exceeding $500 during peak seasons.

The mid-market short-term rental segment in Dubai targets a broader audience. Reasonable price points attract couples, families, multi-generational trips, groups of friends, and business travelers who seek well-equipped accommodation. With a broader audience comes more stable and predictable demand, which provides investors with a steadier balance between investment and returns.

Neighbourhoods like Dubai Marina and Business Bay enjoy consistent popularity with daily rates for short-term rental accommodation averaging between $150 and $300.

The budget segment focuses on providing wallet-friendly accommodation for travelers, including backpackers. While this segment benefits from an increasing demand for value-driven options and subsequent high occupancy rates, it traditionally yields lower profit margins.

An increase in tourism to Dubai from non-traditional markets has driven this segment, as has a push from travel and tourism companies highlighting authentic and affordable experiences. Locations removed from the main tourist hotspots but remain well-connected to Dubai’s public transport network are the most common destinations for these accommodations.

The average daily rate for budget short-term rentals in Dubai can range anywhere from $50 to $100.

Taking these factors into consideration, the mid-market segment emerges as the most consistently promising segment for investors. The broad appeal of this segment ensures steady demand throughout the year, while the balanced return provides stable income without the increased risks associated with the luxury segment. 

When it comes to luxury properties, the high initial up-front costs can be prohibitive for some investors. The flexibility of these properties also allows for easy adaptation to the diverse needs of the traveller group, i.e. from families to business professionals.

With a record number of international visitors to Dubai last year, a significant portion opted for mid-range accommodation options with this trend expected to continue. The continual development of new tourism areas are vital in attracting a wider range of tourists to Dubai.

With more affordable accommodation options, travelers have more choice when it comes to accommodation and can be more selective and price-conscious. Additionally, the increase in digital nomads and new rules and regulations for entrepreneurs in Dubai encourage longer-term, mid-market stays.

For investors looking at which segment to invest in, locations with good access links to attractions, transportation hubs and business districts are key for maximising occupancy rates.

Dubai’s short-term rental market presents potentially lucrative opportunities for investors. While the luxury segment offers potential high-yield, the mid-market segment provides a more balanced and stable investment option with a wider potential customer base…